U.S. Independent System Operators (ISOs) are creating short-run markets for so-called “flexiramp”. Theaim of these markets is to ensure that enough flexible generation capacity is on-line to manage theincreasingly volatile net loads resulting from growth in renewable energy. In particular, we assume thatthe purpose of flexiramp is to improve the expected performance, in terms of costs, prices, and reliability,of the ISOs’ deterministic market models. Therefore, we compare the solutions of (1) a deterministicdispatch model with a flexiramp constraint that simulates ISO operations with (2) a stochastic dispatchmodel that, by definition, obtains schedules that minimize expected cost. Dispatch, prices, settlements,and market efficiency are contrasted in a simplified case study to explore the fundamental reasons forsuccesses (and failures) of flexiramp markets. The results illustrate how flexiramp can enhance marketefficiency. However, they also show that procuring flexiramp is insufficient to minimize expected costs, and that market parameters affect the quality of the solutions. The simulations furthermore show thatdeterministic markets with flexiramp can yield either higher or lower prices than the stochastic optimum.We propose a penalty-based approach to mitigate possible biases towards choosing capacity with highenergy costs to provide flexiramp, and conclude that market operators will need to monitor marketperformance and adjust flexiramp parameters in order to maximize market efficiency.

Electric Power Systems Research 109 (2014) 128-140